Bank of England: Inflation could remain above target for two years

Sir Mervyn King, Governor of the Bank of England, has warned that inflation
will rise to 3 per cent or more and is likely to remain above target for
another two years.

Mr King, speaking to reporters after the central bank published its quarterly inflation report, said the Bank of England remained ready to do more to help the economy if needed.

He asid: Increases in tuition fees and energy bills have added to inflation. These and other prices contributed around one percentage point to inflation, more than double the historical average.

"The challenge of bringing inflation back to 2pc is more difficult. Inflation is likely to rise further and may remain above 2pc for next two years, reflecting sterling’s recent appreciation.

He admitted there were limits to what further stimulus of the economy could achieve.

"We must recognise, however, that there are limits to what can be achieved via general monetary stimulus – in any form – on its own," Mr King said, adding that incentives to spend now reduced spending plans of households and businesses in the future.